Bank of England Governor warns of 'triple whammy' of AI threats

Bank of England Governor Andrew Bailey warned of a “triple whammy” of AI-related risks in the central bank’s Financial Stability Report. Speaking as valuations have soared and trading strategies have become more automated, Bailey linked the growing frenzy around AI stocks, including the market debut of SpaceX, to the possibility of a damaging crash that could push the economy toward recession. The Bank also cited escalating cyber risks, arguing that frontier AI could change the speed, scale, and economics of threats to financial institutions’ IT systems. A third risk is how firms might use AI for trading; Bailey confirmed the concern, saying “These models are a big step forward” and that the threat issue is “for real.” Since the December report, the Bank said the rise of frontier models such as Mythos was the biggest change. It modeled a scenario where US stocks correct by 45%, cutting GDP by 2.2 percentage points, while leverage and ETF inflows add volatility. Separately, it reiterated mortgage pressure tied to Iran-driven energy and inflation, with five million borrowers facing typical repayment increases of £45 by 2028.